Tuesday, July 15, 2008

Abu Dhabi outpaces Dubai in housing costs and rentals

Abu Dhabi outpaces Dubai in housing costs and rentals
By Suzanne Fenton, Staff Reporter GULF NEWS Published: July 15, 2008, 00:08

Dubai: The housing prices and rental prices in Abu Dhabi have overtaken prices in Dubai for the first time, according to the latest industry report.

Figures from the latest HSBC report show that the average rent per square metre in Abu Dhabi was $272 per square metre in the last quarter 2007 and $430 per square metre in the second quarter 2008, representing a 58 per cent growth.

In the same time period, Dubai's average rent was $343 per square metre in the last quarter 2007 and $420 per square metre in the second quarter of 2008, representing only a 22 per cent growth.

Similarly, for buying a house, Abu Dhabi witnessed a 61 per cent growth in house prices between the last quarter 2007 and the second quarter 2008, while Dubai saw a 37 per cent growth in the same period.

HSBC analyst, Majid Azam told Gulf News, "The main reason prices in Abu Dhabi are outpacing Dubai is because the market is much tighter and delivery delays are more apparent. Ultimately, we believe that Abu Dhabi should be at a premium because affordability is higher."

Basic infrastructure

The report concluded that there are delays in both Dubai and Abu Dhabi and Dubai is experiencing such rapid growth, that basic infrastructure, such as water, electricity and sewerage systems cannot keep up with the pace of development.

Around 160,000 units were expected to reach the housing market in Abu Dhabi by 2010, but Colliers International now estimates that only 31,000 units will be available, due to the problem with delays.

A recent Fitch report had warned of a dangerous oversupply situation in Dubai with the massive glut of housing units set to hit the market in 2009.

However, HSBC note in their report that they expect most deliveries of units will be made in 2011.

The lack of housing in Abu Dhabi has led people to move to Dubai and commute to Abu Dhabi, similar to Sharjah and Ajman residents. This will prevent a possible oversupply situation in Dubai.

"We believe that the housing shortage in Dubai is here to stay at least until 2010, when the bulk of deliveries are expected to hit the market. However, with continuous delays, even an oversupply in 2010 seems unlikely," Azam said.

The report also says while prices in the UAE are increasing, they are still affordable by international standards.

"Based on current plot prices of Dh7,000 per square metre, we estimate a residential property sales price of Dh28,000 per square metre by year end, suggesting price growth is set to slow from the rapid rates, since the start of the year," said the report.

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